The tax year ends on 5 April 2026. That deadline matters, but it does not mean you should use every allowance just because it exists. Good tax planning is about making sensible moves that improve your long-term plan, cut unnecessary taxes, and keep your money in the right place.
For 2025/26, the key figures are: Personal Allowance £12,570, ISA limit £20,000, Junior ISA £9,000, Lifetime ISA £4,000, pension Annual Allowance £60,000, Money Purchase Annual Allowance £10,000, Capital Gains Tax exemption £3,000, and dividend allowance £500. [1]
A sensible order is usually: ISAs first, pensions second, taxable accounts third, family gifting fourth, specialist reliefs last. And one rule matters throughout: if a tax move leaves you short of cash or damages your long-term plan, it is usually not worth it.
1) ISAs: usually the first thing to check
Each adult can put up to £20,000 into ISAs in 2025/26. This can be split across cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs. A Lifetime ISA has its own £4,000 limit within the overall £20,000, and the government adds a 25% bonus, up to £1,000 a year. Junior ISAs have a separate £9,000 limit per child. [2]
So a couple can shelter £40,000 between them before 5 April. A couple with two children could also put £18,000 into Junior ISAs. [2]
The real question is not just whether to use an ISA, but what to put inside it. The best assets are often the ones that would otherwise create tax outside an ISA: investments paying dividends, bond holdings paying interest, or long-term growth assets that could later create Capital Gains Tax.
Cash can belong in an ISA too, but many people make the mistake of filling their ISA with cash while leaving long-term investments outside in a taxable account. If the cash is only sitting there temporarily and the investments are for the long term, that may be the wrong way round. An ISA is not just a place for savings. It is one of the best long-term tax shelters available. [2]
There is also a year-end tactic called Bed and ISA. This means selling investments held outside an ISA and buying them back inside the ISA. That can move future growth and income out of the tax system. But the sale can still trigger Capital Gains Tax, so you must check that first. This is often best done gradually over several tax years rather than all at once. [3]
2) Pensions: very powerful, but easier to get wrong
For 2025/26, the standard pension Annual Allowance is £60,000. This includes both personal and employer contributions. You may also be able to use unused allowance from the previous three tax years. But two big limits can reduce what you can pay in: the tapered Annual Allowance for higher earners and the Money Purchase Annual Allowance for people who have already started taking flexible income from a pension. [4]
For higher earners, the taper starts when their threshold income is over £200,000 and their adjusted income is over £260,000. Above that point, the allowance falls by £1 for every £2 of adjusted income over £260,000, down to a minimum of £10,000. So high earners should not assume the full £60,000 is available. [4]
The Money Purchase Annual Allowance is £10,000. It can apply once you have flexibly accessed a defined contribution pension. People often think they have only taken “a little” from a pension, then find they have sharply reduced how much they can pay in later. Unused MPAA cannot be carried forward. [4]
For personal contributions, you normally get tax relief up to 100% of earnings. If someone has no earnings, they can still usually pay in £2,880 net, which becomes £3,600 gross after tax relief. Higher-rate and additional-rate taxpayers may need to claim extra tax relief themselves, depending on how the pension is set up. [5]
Pensions can also solve specific tax problems. Adjusted net income falls when you make gross pension contributions or gross Gift Aid donations. That matters because adjusted net income is used for the loss of Personal Allowance above £100,000 and the High Income Child Benefit Charge above £60,000. [6]
For example, someone on £110,000 may be in an especially painful tax zone because the Personal Allowance is reduced by £1 for every £2 above £100,000. In practice, that creates an effective 60% income-tax band between £100,000 and £125,140 for many people in England, Wales and Northern Ireland. A pension contribution that brings income back down can therefore do more than save normal higher-rate tax. It can also restore lost Personal Allowance. [3]
The same idea applies to Child Benefit. If you or your partner has an adjusted net income above £60,000, some Child Benefit is clawed back. At £80,000 or above, it is fully clawed back. The charge is 1% of Child Benefit for every £200 of income above £60,000. Pension contributions can reduce adjusted net income and therefore reduce the charge. [7]
Pension planning is usually strongest if:
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You are close to £100,000 income,
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You are between £60,000 and £80,000 and receive Child Benefit,
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You have high income and unused carry forward, or
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You own a company and can control salary, dividends and employer pension contributions. [6]
But do not make a pension contribution just for tax relief if you may need the money soon. Pensions are powerful partly because the money is locked away. If you may need the money for school fees, debt reduction, a house move, business needs or early retirement spending, an ISA or cash may be more suitable.
3) Taxable accounts: tidy them up before year-end
The Capital Gains Tax exemption for 2025/26 is only £3,000 per person. That is much lower than it used to be, so normal investment accounts now create tax issues faster than many people expect. For disposals from 6 April 2025, the main Capital Gains Tax rates are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. [3]
Because the exemption is now so small, it can make sense to realise gains up to that limit rather than letting gains keep building year after year. This is often called gain harvesting. It can work especially well when combined with ISA funding, spouse transfers or losses. The point is not to trade for the sake of it. The point is to stop a future tax problem from getting larger than it needs to be. [8]
Spouse planning matters here, too. Transfers between spouses or civil partners who live together are usually treated as no gain/no loss for Capital Gains Tax. That means assets can often be moved between spouses without an immediate tax charge, letting the family use two annual exemptions instead of one. It can also mean more of the gain falls into the lower tax band if the receiving spouse has a lower income. [9]
Dividends matter as well. The dividend allowance is now only £500, and dividend tax rates above that are 8.75%, 33.75% and 39.35%, depending on tax band. So even a modest investment account outside ISAs and pensions can now create taxable dividends. [3]
Savings interest should be checked too, especially if you hold a lot of cash. The starting rate for savings can be up to £5,000 if non-savings income is low enough. The Personal Savings Allowance is usually £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. That means some people can still receive bank interest tax-free, while others may now be paying tax on cash they thought was harmless. [3]
A practical year-end check of a taxable account should ask:
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What gains exist but have not yet been realised?
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What gains have already been realised this tax year?
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Are there losses to use or report?
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Are assets in the right spouse’s name?
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Have this year’s ISA allowances been used?
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Is dividend or interest tax now big enough to justify a change?
4) Couples and family planning: small rules, real savings
Some of the best year-end wins are simple.
Marriage Allowance can let one low-earning spouse or civil partner transfer £1,260 of Personal Allowance to the other, cutting tax by up to £252. [10]
Married Couple’s Allowance still applies where at least one spouse or civil partner was born before 6 April 1935. For 2025/26 it can reduce tax by between £436 and £1,127. [11]
Junior ISA funding can also sit alongside wider family gifting. A JISA allows up to £9,000 per child in 2025/26, and grandparents often use this as part of wider inheritance tax planning. The JISA itself does not remove inheritance tax, but the gift can sit alongside the normal gifting exemptions, and future growth in the JISA is free of income tax and Capital Gains Tax. [12]
5) Inheritance tax gifting: use the rules properly
The annual gifting exemption is £3,000 each tax year. If you did not use last year’s exemption, you can carry it forward for one tax year only. So someone who did not use their 2024/25 exemption could potentially give £6,000 in 2025/26 under this rule. This is per donor, not per person receiving the gift. [13]
There is also the small gifts exemption: as many gifts of up to £250 per person each tax year as you like, as long as you do not use another exemption on the same person. There are also wedding or civil partnership gift exemptions of £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to anyone else. [13]
A very useful rule is normal expenditure out of income. This can apply when gifts are part of normal spending, are made from income, and leave the donor with enough income to maintain their usual standard of living. There is no fixed limit on this exemption. For the right family, that can make regular gifts much more useful than occasional lump sums. But it only works well if records are kept properly. [13]
Then there is the seven-year rule. Most gifts outside the exemptions are potentially exempt transfers, so if the donor survives seven years, the gift usually falls outside the estate for inheritance tax. If the donor dies within seven years, the position is more complicated. A common mistake is thinking the tax simply halves after a few years. It does not work that neatly. Good records matter. [13]
6) Gift Aid: often ignored, but useful
Gift Aid is more valuable than many people think. If you donate under Gift Aid, the charity reclaims basic-rate tax, and higher-rate taxpayers can usually claim back extra relief personally. If you give £100, the charity treats it as £125 gross, and a 40% taxpayer can reclaim £25. [14]
Gift Aid can also reduce adjusted net income, because HMRC says you deduct the grossed-up amount when working it out. So Gift Aid can help in the same danger zones as pension contributions: above £100,000 for Personal Allowance and above £60,000 for Child Benefit. [6]
There is also a timing rule. In some cases, a Gift Aid donation made in the current tax year before you submit your tax return can be treated as if it was made in the previous tax year. But the rules are strict, and the claim normally has to be made in the original tax return, not added later by amendment. [14]
7) Business owners and higher-risk tax planning
For Business Asset Disposal Relief, qualifying disposals made from 6 April 2025 are taxed at 14%. Disposals on or before 5 April 2025 were taxed at 10%, and from 6 April 2026 the rate rises again to 18%. That does not mean people should rush into selling a business. But if a sale is already likely, timing may matter. [15]
For Venture Capital Trusts, investors can currently claim 30% upfront income-tax relief on up to £200,000 a year if the conditions are met, and VCT dividends are tax-free. Budget 2025 said that this upfront relief will fall from 30% to 20% from 6 April 2026. That may make 2025/26 more interesting for suitable investors, but VCTs are still high-risk and should not replace a sensible core portfolio. [16]
For EIS, current HMRC guidance still allows 30% income-tax relief, and there is also a carry-back option in some cases. Again, this is specialist, high-risk planning, not something most people should do just because the tax year is ending. [17]
8) What not to do before 5 April
Do not:
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Lock money into a pension if you may need it soon,
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Sell investments without checking gains, losses and tax bands first,
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Assume the full £60,000 pension allowance applies to you,
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Make gifts without keeping records,
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Let a tax deadline push you into a bad product, rushed investment or cash shortage.
The tax year-end is a chance to tidy things up. It is not a reason to make bad decisions faster.
9) A simple order to follow before 5 April 2026
For most households, the right order is:
- First, check unused ISA allowances for both spouses.
- Second, see whether pension contributions would help with the £100,000 Personal Allowance problem or the £60,000 to £80,000 Child Benefit problem.
- Third, review taxable accounts for gains, losses, dividend tax and Bed and ISA opportunities.
- Fourth, use spouse planning where it helps.
- Fifth, review family gifting, including annual exemptions and regular gifts out of income.
- Sixth, if you already give to charity, review Gift Aid timing.
- Seventh, only then look at specialist reliefs such as BADR, VCTs or EIS. [2]
Good tax-year-end planning usually looks boring. It is mostly about using the right tax wrappers, cutting avoidable tax, making better use of rules for couples and families, and using pensions or Gift Aid carefully when income has pushed you into a harsher tax position.
Get those basics right before 5 April 2026, and you will usually have done the work that matters most.
If you need advice, we’re here to help. Schedule a free, no-obligation chat here. A guide on selecting a financial advisor is also available here.
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Income Tax rates and Personal Allowances: Current rates and allowances
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Venture Capital Trusts: Introduction to National and Official Statistics
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HS341 Enterprise Investment Scheme — Income Tax relief (2025)
